UPDATE: ECB Accounts: Was Premature to Set End-Date for APP

By Christian Vits

     FRANKFURT (MNI) - European Central Bank policymakers in their most recent

policy meeting on Oct 26 saw no need to provide an end date for their bond

buying program.

     "Given the current assessment of the progress towards the inflation aim, it

would be premature to set an end date for net purchases," the ECB said in its

latest minutes, published Thursday.

     However, the ECB admitted that "arguments were also put forward by a few

members, reflecting also further members' initial preferences, in favour of

announcing a clear end date for the APP."

     Such an end date was viewed to be "well justified" in anticipation of

further progress towards a sustained adjustment in the path of inflation on the

basis of the better than expected growth momentum, diminishing risks and

continued favourable financing conditions for the real economy, according to the

minutes.

     "A view was put forward" that there was no longer a case for an open-ended

extension, unless deflation risks were to re-emerge, the minutes noted. It was

also argued that the balance of costs and benefits was becoming "increasingly

unfavourable" as time progressed.

     The ECB decided last month to extend the bond-buying program for nine

months and halve its purchases from the current E60 billion per month to E30

billion, effective from the start of next year. ECB President Mario Draghi

argued that there is still "a large amount of uncertainty" and added that the

decision "is for an open-ended program and it is not going to stop suddenly."

     At the same time, the ECB's room for manoeuvre is shrinking, due to the

bank's self-imposed rules and the scarcity of assets which can be bought.

     Members "widely shared" the assessment that inflation dynamics remained

subdued, with longer-term inflation expectations appearing to be still "some

distance" away from the bank's target and the recovery in inflation "still

reliant on supportive monetary conditions", the minutes said.

     Inflation in the currency bloc remains to date well below the ECB's target

of "below but close to" 2%. Euro area annual inflation was 1.4% in October, down

from 1.5% in the previous month.

     The minutes also noted that incoming information pointed "to stronger than

expected growth momentum in the second half of the year. Against this

background, some observers expect the ECB to revise its growth expectations

upwards when new projections will be announced in mid-December.

     The risks to the economic outlook were seen as "broadly balanced".

     Governing Council members also "took note" that exchange rate volatility

had receded since their previous meeting in September.

--MNI Frankfurt Bureau; +49 69 97782671; email: christian.vits@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

[TOPICS: M$X$$$,M$$EC$]